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Middleton Doll to Move Ohio Production to China
PEWAUKEE, Wis. -- The Middleton Doll Co. plans to move production of its Lee Middleton Original Dolls to China. The company is the last major doll company that maintains production facilities in the United States. As a result of moving production to China, the company will reduce its work force in Belpre, Ohio, by 35 employees but will continue to operate the Belpre factory store that draws tourists from across the country.Also today, the company announced a new alliance with the Saks Department Store Group and a change in its dividend policy.The move of the company's Artist Studio Collection to China, where manufacturing costs are less, comes in addition to extensive efforts over the past three years to reduce operating expenses. The shift will begin with the company's traditional mid-year catalog release in early July."We regret that this day has arrived, as we will be losing many employees who have been with the company for much of our 25-year history," said George R. Schonath, president and chief executive officer. "This decision was not taken lightly and under ordinary circumstances could have been enacted over a year ago." The production facility selected to make ASC dolls is a current supplier who has devoted a separate unit and staff exclusively dedicated to the manufacture of these dolls. "This facility began producing Newborn Nursery play dolls more than a year ago and has successfully learned the unique production techniques for our ASC dolls," said Schonath.Schonath said the new cost structure created by this manufacturing relationship provides opportunities to add unique attributes and enhancements to the company's dolls that would otherwise have not been possible. "We believe there will be many long-term benefits to this relationship, including our ability to create and offer a sophisticated, yet reasonably priced doll with hand-rooted hair such as that on our Breath of Life Babies," said Schonath.The company also is partnering in a venture with the Saks Department Store Group with the opening of three Newborn Nursery Adoption Center departments that will be located in proximity to the children's departments of this leading department store retailer this summer. This strategic alliance looks to expand Lee Middleton Original Dolls' award-winning Newborn Nursery retail concept into a high-end, mainstream retail venue. These shops will utilize a design modeling Lee Middleton Original Dolls current freestanding store located in the Polaris Fashion Place shopping mall in Columbus, Ohio. The first shop is to be located in the Parisian store located in the Riverchase Mall in Birmingham, Ala., and is scheduled to open on June 4.As a result of the company's obligation to redeem $16.9 million of preferred stock on July 1, 2008, the Board of Directors approved a plan to convert loans and leased properties to cash as loans mature and leased properties are sold. Proceeds will be used to reduce outstanding debt and redeem preferred stock at maturity. With the adoption of this new policy, the company, with limited exceptions, does not intend to make new loans. The decrease in earning assets will reduce taxable income available for common stock dividends in each of the next four years.In addition, Lee Middleton Original Dolls will no longer pay management fees to The Middleton Doll Co. The elimination of management fees will increase working capital for Lee Middleton Original Dolls but will further reduce the taxable income of the company's financial services segment.The expected decrease in taxable income requires that directors change the common stock dividend policy from a quarterly dividend to an annual dividend payable in January for the preceding year. The dividend on the preferred stock will continue to be paid on Jan. 1, April 1, July 1 and Oct. 1."For the shareholder who bought common stock for dividend income, I can understand your disappointment," Schonath said. "For the shareholder who bought preferred stock with the expectation of redemption in 2008, I believe our plan acknowledges our responsibility to redeem it at maturity. I believe the steps announced today are necessary for the future of the company and its return to profitability."The Middleton Doll Co. operates in two segments, consumer products and financial services. The company's consumer products segment is comprised of Lee Middleton Original Dolls Inc., a designer, manufacturer and marketer of lifelike collectible and play dolls, and License Products Inc., a designer and marketer of clocks and home decor products that are sold to major national retailers. The company's financial services subsidiary is a real estate investment trust. "